The answer’s easy: it doesn’t work for music. Unless you were living under a rock on Friday, you probably read Techcrunch’s post, “The Sorry State of Music Startups.” Without going into great detail, Arrington’s completely right, and for once, he doesn’t resort to the whole “music just wants to be free” argument so common among Web 2.0 types. Instead, he writes that “free streaming music” is about as sensible as trying to douse a burning pile of money with a gallon of gasoline.
With all due respect to Bruce Houghton at Hypebot and Andrew Dubber at New Music Strategies, the dream is over. It’s time to wake up and smell the coffee.
Bruce’s post “Why Are We Still Debating Free?” infuriated me. Sure, Chris Anderson’s notion of “freemium” sounds great for any website looking to get users to come back often to consume content, but look at the body count piling up in Music 2.0 and tell me how that looks. It’s not truly “freemium” because they don’t own the good in question to begin with. Andrew Dubber incorrectly states that “Yes, Google gives their consumer-facing stuff away, and they are a massively successful company.” Google owns search on the web. They’re not giving that away. They have a near monopoly on the most potent revenue stream on the web!
Those of us who work very hard on the editorial side, especially on the web, know just how difficult it is to get people excited about music these days. There are times you can’t give the stuff away! For all the talk about bands as brands and what-not, I can say honestly that music may have never been a smaller part of the overall entertainment picture than it is today. Sure, music may be ubiquitous in commercials, on our iPods, and wherever else it lives, but that doesn’t mean people are actively seeking it out in any meaningful way.
The music business has changed and so have music consumers. Now that music can be had for next to nothing, consumers are willing to accept whatever low-quality product is available online and see no incentive to upgrade. The same is true in any other business that’s been affected by the Internet. It pains me to say it, but there may be no future whatsoever for music as a business in its own right. The only thing these businesses can really sell are t‑shirts! How can a strategy around “freemium” work when consumers are already acquiring the good for free or nearly free?
Not wishing to take anything away from your point about dominant historical approaches to recorded music business being essentially unsustainable, but to clarify the Google example:
Go search for something on Google. Do they charge you money to do so? If not, the value you just received was free to you. The fact that Google have a very successful model of monetising that transaction does not mean it wasn’t free to the consumer.
It surprises me that so many people find this part of Anderson’s thesis so difficult to understand.
Your response to my ‘Google gives their consumer-facing stuff away’ seems to be ‘Aha! But they make money at it, so it isn’t free.’
Free doesn’t mean ‘doesn’t make money’. Obviously. It’s not the business model, it’s the strategy that makes the business model work.
How much money would Google make, do you think, if instead of being free, they charged you as a consumer 10 cents per search?
Search is the free, consumer-facing activity that is the basis on which Google makes a very tidy B2B operation incredibly successful. Business model and strategy. Income based on free.
Here’s the thing about Google: search is an algorithm. It’s also the only real internet-based revenue stream. Owning a near monopoly on that is a real asset.
Conversely, if you had a near monopoly on music online, you’d probably be broke. Hype Machine is the only thing I can think of that can provide an on demand music experience and circumvent all the other issues facing anyone who’s running a streaming music startup.
If the music is free, then what other product can the music industry sell to account for those losses. Advertising isn’t the answer.
1) When you say ‘the music industry’ — do you mean ‘the record business’?
Because the presupposition that there needs to be something in place to save that is not necessarily true. If I was a betting man, I’d put money on the cleverness of the startup entrepreneur triumphing over the greed of the record company exec. History proves this principle over and over again. Refer Seth’s point about guilds: http://is.gd/liue
2) Music’s not free. Recordings of music are free. There’s an important difference that musicians and people who want to make money out of music online should take note of. Now, if that’s true — and I think to a large extent it is — then trying to be a major multinational company that makes money from the recordings of music is a bit of a non-starter. Instead, it becomes a significant niche, where smaller players can thrive.
The problem of how large record labels can make money if recordings are free begs the question ‘Who says we have to live in a world where they do?’
I have no problem with those organisations existing and making money. I have a real problem with that being the most important thing.
3) Arrington’s right: the thing that makes streaming music services problematic is the last ditch bit of greed from the old guard. They’re not interested in making things sustainable, they’re just trying to keep their jobs. But you’ll note he also says they’ll be back, cap in hand, paying for placement in the streams of the services that end up surviving their current onslaught.
Here’s the thing about the promotional gambit Arrington puts forth: streaming services aren’t promotional because they don’t result in sales. I still don’t see how your free plan actually makes money; instead of four massive companies losing money, I see countless individuals losing their shirts trying to market to this niche.
I think you’ve also lost sight of the main problem facing the record business or the music industry or whatever you’d like to call it: people don’t care about music as much as you think they do. There’s a reason music news has changed into either tech stories or gossip. It’s because there’s no other hook for music on its own, at least not at the moment. I’m working on an editorial plan to change that, but it’s what we have for now.
I’ll say this on your last point… I find myself caring more about music now that probably at any point in my life. But, I care less about the individual artists over time. I used to be a die-hard fan of certain acts and would wait anxiously for the next release (filling the void between releases by re-listening to their catalog). Now, I find myself just finding new content that I like well enough to be me satiated in my continual quest for good music.
When I was younger I feel like I would listen to an album for a year or more. Now, even an album that I consider great generally doesn’t get played in heavy rotation in my ears for more than about a month. But, in aggregate I probably listen to music at least 5x than I used too.
Jason describes the profile of a music “consumer” that has been fairly constant despite the roller coaster ride the recording business has been on over the last 40+ years. Even at the height of CD sales, the average active U.S. music consumer purchased 10 CD’s per year. The vast majority of music consumers have always been passive about becoming “fanatics,” and they will likely continue to be.
The challenge in the new landscape is how to generate revenue from them and from people like Jason who is listening to music 5x as much as he used to. Clearly advertising-based interactive streaming (which is far more expensive to these companies than non-interactive streaming) is not the answer. Arrington wrote, “Their business model doesn’t work and it is going to continue to not work until the labels let it work.” If your product depends on someone else “letting” it work, you don’t have a business.
The reported death of the music business is like that quote from Mark Twain. An exaggeration. The major labels have already begun taking the organizational shape of the publishing side of the business-smaller operations focused on licensing opportunities and acquiring rights they can exploit.
What is dying is the impetus for it to be controlled by publicly traded or multinational corporations that must make quarterly reports of their results, beat estimates and squeeze out unreasonable leaps of growth where their is none. The New York, London and Tokyo stock exchanges all took music for a ride during the extended cycle inflated by mass media such as music on television (going back to Elvis and the Beatles) and radio consolidation, and then explosive catalog sales with the format change from vinyl to CD.
Just as the volume of music sold is resetting back to the levels before The Eagles’ Greatest Hits, Thriller, the Bodyguard soundtrack etc. when 500k in sales was considered a hit, music company operations are returning to small players who are focused on understanding the potential of the artists they work with and the customers who want to buy things because they are related to that artist. Call me a dreamer, but I think one of those things they buy will be some format of music; it just won’t be the ubiquitous, valueless mp3 file.
JT, you’re much too smart to indulge in Lefsetz-type rants saying “the music industry is dead.”
The old model is definitely dying but all of the people who bought the last Radiohead or Nine Inch Nails albums prove that there’s still plenty of folks out there willing to dish out money when they don’t have to. RH and NIN succeeded not only because they were already name brands with a big fan base but also because music fans wanted to support their bold, enterprising efforts.
It’s a different story when you’re acutely aware of how many pageviews music drives to a website compared to other content areas. I’m not simply imagining how difficult it is to get people excited about music for its own sake.
RH and NIN seem big because they pulled off great PR stunt launches after their brands were built by major labels and MTV. What will they do for an encore? I think it’s telling that Reznor just plans on quitting.
JT, no offense against Comcast (except for the horrendous customer service) but are pageviews for that website really a definitive measure? As a past Comcast customer, I never understood what Comcast.net was trying to be. Music was the first form of media to be effected by the “digital revolution” and if it has splintered from properties that are general interest (including Yahoo, AOL, MSN, etc.) is that really so surprising?
hi, i think there’s two very different business models here.
1. The unknown act, who is looking to SPREAD.
2. The established act who can do what he likes.
I think FREEMIUM works to help spread ideas. it’s a marketing technique. if you already have a massive audience, then you can generate more buzz by offering your album for free, but that’s up to you.
It’s the underground bands that can really benefit from a freemium model, and here is how:
http://flapsandwich.blogspot.com/2009/03/does-freemium-work.html
I think you raise a good point, Brenda, but pageviews are still the benchmark by which almost any website is judged. I take it as a measure of how interested people are in anything related to music. It’s a gripe common among any editors who are actually deep-diving into Omniture on a regular basis, with an eye toward site engagement goals. It’s a tricky business.
I think you’re missing something important about the big portals though. They’re still a huge part of Internet traffic and are real hubs for lots of people. I personally am thrilled at the opportunity to take Comcast.net’s music page into the next generation and try to reach different audiences with varying degrees of interest in music content. As I see it, we have the eyeballs it takes to expose people to all sorts of music content; it’s just a matter of getting labels to see that they can’t ignore a site like Comcast.net just because it doesn’t have a footprint in Los Angeles or New York City. It’s just too big an opportunity to pass up!
Thanks for the link, Johan. I think OK Go had great success, if only for a moment, with a viral piece of content. The problem is how do you channel that excitement into a reliable fanbase you can expect to see out at your shows? I haven’t heard a peep from OK Go since they appeared on “The Colbert Report.”
All big media is going through these same near-death growing pains. At the end of the day, people will always make music, paint pictures, take photographic images, edit together moving pictures and sound. The fact is that the cost of creating mass-produced media is just getting lower and lower and over time and the value of the ‘archive’ of that content is falling rapidly. Rarity is the future. Or commodity.
I’m in the camp that says if the only way music will be heard is to give it away, then so be it. No more advertising supported anything. No more over-paid PR. No more wildly gouged ticket prices. Just people. Playing instruments and singing. And sharing it, in whatever form — live, home recording, whatever — with their friends. Some folks actually make a living at that. See: Amanda Palmer.
Then again, I hang out with a bunch of experiential avant-garde folks who will probably never make a dime off their art anyway, so maybe that effects my opinion on the matter.
JT, I get that the portals are big entry points for a lot of people, however do those people actually see the portals as gateways to their deeper interests? Or put another way, if I love indie rock, am I more inclined to trust Comcast as my source for indie rock or Pitchfork? As it relates to my online personality (or personal brand), when I share a link on Facebook or tweet about finding some great music, what does it say about me as a music fan if that link comes from Comcast, Pitchfork (Pitchfork isn’t based in LA or NY is it?) or the band’s site?
Could it be that the Comcast brand is getting in the way? Is it possible that the people who will go to Comcast for music are more followers than influencers and a part of the greater mass of casual music listeners who are simply more passive anyway?
Music has never just been about the tunes themselves and since the explosion of sonic identity with ringtones and personal MySpace pages, it has becoming so much more than the soundtrack to our lives.
As for OK Go, most hit singles are from one hit wonders. Reliable fanbases are built from great live shows and consistently strong recordings, not one attention-grabbing song, regardless of how it got that attention.
There’s a great post on Idolator that mentions Palmer, and even she says there are real issues with this approach. I guess the hardest thing to understand is how easily we can communicate via the Internet, yet all forms of media seem to be taking a step backward to the 18th Century.
Pitchfork has had New York offices for at least two years.
Also, as concerns the Comcast brand: I don’t think it gets in the way at all, but is more a matter of getting publicists to understand, as I’ve written before, that there’s a tremendous opportunity to get their artists in front of huge audience. When people are wondering where they should look now that Blender has been relegated to an online-only presence, I want them to know that I’m looking to work with bands, provided that “working with” means more than getting an mp3 to stream.
So aren’t you in a bit of a chicken and egg situation? If pageviews aren’t great, why should they give you more than an mp3? If they give you exclusive content will it deliver?
It’s a shame that publicists are holding Philly against you, but I must say that I don’t know many seasoned music marketers who care where a company is located as long as it has some buzz and delivers results.
When it comes to music, Comcast doesn’t have buzz. I certainly support you in your drive to change that, but I don’t think getting the content alone isn’t going to be enough.
Well, pageviews aren’t great compared to general entertainment news, but compared to other outlets that are music-focused, my numbers are the stuff of dreams! I started out the year with two months of record-breaking traffic for comcast.net/music!
I guess I should’ve clarified that.